Fidelity Investments Canada Ltd. announced today that it is reducing fees on its mutual funds, and introducing two new series of fund units.

Fidelity will make this reduction available through:

  • Lower management fees and other expenses on units purchased with a front end load option (ISC) effective January 10, 2005;
  • Automatic conversion of units purchased on or after January 10, 2005 with a back end load (DSC) to lower fee ISC units 7 years after purchase; and
  • Subject to regulatory approval, the automatic conversion of existing DSC units on the same basis as above.

    In making these changes, Fidelity says it is reflecting the lower distribution and fund operating costs associated with the ISC structure.

    The management fee on ISC units of Fidelity equity, asset allocation and balanced funds and Fidelity American High Yield Fund will be 15 basis points lower than on Series A, DSC units. The management fee on ISC units of Fidelity fixed income and money market funds will be 25 basis points lower. Operating expenses will also be lower on ISC units.

    As a result, MERs on Fidelity equity, asset allocation and balanced funds will be approximately 20 basis points lower. MERs on Fidelity fixed income funds and money market funds will be approximately 30 basis points lower. The MER on DSC units will not increase as a result of these changes.

    Along with these two new choices, the organization is also launching a low load option for every fund in the Fidelity Canada family.

    “Fidelity has a 58-year tradition of acting in the best interests of investors and this step to reduce their investing costs is one more way for us to do that,” said President David Denison, in a statement. “We are offering clearer fee options, more flexibility and better value for both investors and advisors.”

    The separation of fund units with different purchase options and different fees also means they will now have different names. Previously, fund units with both ISC and DSC purchase options were known as Series A. With this change, ISC fund units will be in the new Series B.

    On Jan. 10, 2005, Fidelity will convert all existing Series A ISC investors into this new, lower fee series. Units originally purchased with a DSC option will remain Series A.

    After the change takes effect, the two series will have separate Net Asset Values (NAVs) which will both be provided to fund data services to be tracked in their fund price listings.

    In order to offer the new lower cost to Tax-Efficient Systematic Withdrawal (T-SWP) investors, Series S will be created with identical lower management fees as Series B. On Jan. 10, 2005, Fidelity will move all existing Series T ISC investors into this lower fee series.

    To make the lower fees available to investors in DSC units, Fidelity will convert DSC units to new ISC units seven years after the purchase date. Neither investors nor their advisors will be required to do anything to take advantage of this new auto-conversion feature and there is no negative tax consequence to investors.

    Fidelity says it is the first mutual fund organization in Canada to offer this feature that moves long-term investors to a lower fee structure.

    Subject to regulatory approval, Fidelity will also make this feature available for investors who already own DSC units. If approved, Fidelity anticipates that conversion of DSC units already held seven years or more will commence in late March or early April of 2005.

    Fidelity’s new low load option is a deferred sales charge option with a shorter redemption schedule (two years) and lower redemption charge. It will be available in Series A units on all Fidelity Canada funds as well as with the T-SWP feature (Series T) for investors seeking cash flow. Investors who choose the low load option will also benefit from the new auto-conversion as their units will be converted to lower fee Series B or Series S units three years after purchase.

    Changes affecting Series A and B also apply to Fidelity Capital Structure Corp. funds. Series F investors will enjoy the same reduced management fees as Series B, including an extra reduction to 0.45% for Canadian Short Term Income Class.

    Investors in employer-sponsored group savings plans administered by Fidelity will remain in Series A, as fees in these plans are negotiated by employers on behalf of their employee investors.